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With crude oil on a tear and the Canadian economy printing one strong report after another, I’m gonna switch to a long Loonie bias with this CAD/CHF breakout play.

Long CAD/CHF Idea

On its 4-hour time frame, I’m seeing an upside break from the descending triangle resistance around the .7800 major psychological mark. This chart pattern is approximately 200 pips tall, so the resulting rally could last by at least the same number of pips.

CAD/CHF 4-hour Forex Chart
CAD/CHF 4-hour Forex Chart

Zooming out to the longer-term time frame shows that the pair actually broke above a large range and has already completed its pullback. This signals that buyers are still very much in the game and might have gathered even more bullish momentum after the retest.

Now this long-term range is approximately 600 pips tall, so I’m thinking I could aim for a huge target while rolling my stop up along the way. After all, fundamentals are looking strongly in favor of the oil-related Loonie at the moment.

CAD/CHF Daily Forex Chart
CAD/CHF Daily Forex Chart

For one, the ongoing “purge” in Saudi Arabia is having a positive impact on crude oil prices, along with expectations of an OPEC output deal extension. U.S. inventories have also been on the decline, easing global glut fears, while agencies have projected stronger demand by next year.

As for the Canadian economy itself, the upside surprise in the October jobs report and the huge jump in the Ivey PMI allowed traders to reconsider the possibility of another BOC hike in the near future. Gains in hiring were driven by full-time work while labor force participation ticked higher.

Data from the Swiss economy has also been somewhat positive as the CPI posted the estimated 0.1% uptick, but the franc does tend to lose ground when risk-taking is in play. SNB foreign currency reserves data and a speech by Chairperson Jordan are still lined up, though.

BOC Governor Poloz also has a testimony comin’ up, so there could be room for Loonie volatility. A press conference is scheduled to follow, which means that he could respond to questions on monetary policy. In his previous speech, Poloz sounded positive about the economic progress made but outlined four sources of uncertainty.

With that, I’m inclined to sit on my hands for now and see how the Loonie reacts to Poloz’s remarks. I might even get to hop in at a better price if the pair retests the broken triangle or dips to the previous range resistance!



See also: Q3 2017 Trading Performance Review

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